Want a Competitive Edge? Rethink Your Employee Benefits | Entrepreneur

Small businesses are navigating a complex labor market and facing unique wage pressures. For any small business owner struggling to find the right talent right now, a smart benefits strategy can help them compete with the premium wages larger companies are often able to offer employees.

Although larger companies often have the advantage in base compensation, a comprehensive benefits strategy can help level the playing field, and it can significantly influence how valued your employees feel.

In fact, our latest benefits sentiment data shows that 78% of employees say they feel valued by their employer due to the medical benefits that are offered, while an even higher percentage (82%) feel valued by the non-medical benefits their employer provides, like 401ks, pet insurance and pre-paid legal. And feeling valued often translates into better retention and engagement.

Related: Why Benefits Can Be More Attractive Than Higher Salaries

Consider this financial reality — while the cost of comprehensive benefits may seem daunting, think about the alternative. With employee turnover costs often rivaling or surpassing annual salary, retention through strong benefits often proves more economical than constant recruitment. Moreover, employees are increasingly making employment decisions based on total compensation packages rather than salary alone.

The good news is that the benefits landscape for small businesses is transforming, opening more opportunities to offer competitive benefits while still managing costs. While many small businesses currently offer traditional group health insurance, there are compelling alternatives to consider. Options like Individual Coverage Health Reimbursement Arrangements (ICHRAs) and Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) offer tax advantages that can help put small businesses on more equal footing with larger employers’ group health insurance programs.

For businesses currently offering group health insurance, HRAs can serve as an effective “off-ramp,” providing more budget predictability and control without annual renewal headaches. In nearly half of the U.S. states, individual health insurance premiums are lower than small group plan rates, allowing small business healthcare dollars to stretch further. Meanwhile, for small businesses that are not yet offering health benefits, HRAs provide an ideal “on ramp” to begin providing health benefits, with their streamlined administration and hands-off nature.

These arrangements allow small businesses to reimburse employees tax-free for individual health insurance premiums and qualified medical expenses. For businesses with fewer than 50 employees, QSEHRAs provide a structured way to offer health benefits, while ICHRAs offer similar advantages for businesses of any size.

Related: Pay isn’t Everything: Why Benefits Need to Be Prioritized to Grow Your Business

Four smart strategies

The key to competing with larger employers isn’t necessarily matching their offerings dollar for dollar but rather being strategic about what you provide. Consider these approaches:

1. Focus on high-impact benefits. While comprehensive medical coverage remains essential, don’t overlook the growing importance of retirement benefits. The SECURE 2.0 Act now provides tax credits to offset the costs of setting up new retirement plans.
2. Leverage technology platforms that make benefits administration manageable and cost-effective. Modern solutions can help even small businesses offer personalized options while maintaining administrative efficiency.
3. Explore partnerships with Professional Employer Organizations (PEOs) or benefits administrators who can help access better rates through economies of scale.
4. Prioritize benefits, education and communication. ADP research shows that employees who better understand their benefits are more likely to value them and stay with their employer.

Taking action

Start by assessing your current benefits strategy against these evolving trends. Are you offering what your specific workforce values most? Consider surveying your employees about their preferences and priorities.

Next, evaluate technology solutions that can help streamline benefits administration. Many platforms now offer features that were once only available to large enterprises, making comprehensive benefits management feasible for smaller organizations.

Finally, don’t overlook the importance of timing. With many employees making benefits decisions during fall enrollment periods, spring is ideal for evaluating and updating your benefits strategy.

Looking ahead

The landscape of employee benefits continues to evolve rapidly. Small businesses that adapt their benefits strategies to meet changing workforce preferences will find themselves better positioned to attract and retain top talent. While the initial investment may seem significant, the return in terms of employee satisfaction, retention and productivity makes it a worthwhile business decision.

Remember, you don’t need to make all changes at once. Start with understanding your employees’ priorities and build from there. In today’s competitive labor market, even incremental improvements to your benefits strategy can make a significant difference in your ability to attract and retain the talent your business needs to thrive.